What Investors Should Know about BrokerCheck

FINRA’s BrokerCheck Could Help Investors More


The Financial Industry Regulatory Authority (FINRA), the watchdog for the securities industry, operates a Yelp or Angie’s List-style database called BrokerCheck. This powerful resource compiles accreditation, work history, and perhaps most importantly customer dispute history on all 650,000 or so registered financial advisors in this country. Unfortunately, as the Wall Street Journal recently pointed out, BrokerCheck is not as useful and in some cases not as honest as it should be. That is a shame. It also means that investors who want to check up on current or prospective brokers may be given a false sense of security or even be mislead by the incomplete information presented to them on FINRA’s well-meaning website.

Investors Should Be Aware of Broker Expungements

The primary reason that FINRA’s BrokerCheck database may mislead investors seeking information about brokers is due to the controversial expungement process. In some cases, broker who have perpetrated misconduct or fraud may be able to appeal to have these incidents struck from their permanent record. While expungements are not as prevalent as they have been in past years, investors should still be aware that when they review a broker’s record on BrokerCheck, they may not be seeing the whole picture.

What Investors Should Look for on BrokerCheck

The first thing investors should look for on BrokerCheck when doing background checks on current or prospective financial advisors is to confirm that the broker is in fact FINRA registered. While a small number of financial advisors in this country operate outside the regulatory system, the vast majority of legitimate brokers will be registered with FINRA through a registered broker-dealer, or brokerage firm. One should also verify that the broker is currently registered with FINRA; in some cases, broker will have been suspended or banned from the securities industry.

Next, you want to look at the broker’s regulatory event and customer dispute history. Here you may find brief descriptions of disciplinary actions and actions brought by aggrieved customers. Do not be afraid to ask your financial advisor about these events.

Finally, look for experience. How long has the financial advisor been practicing in the industry? Is he or she experienced, with a clean record; or is she untried and trying to hustle your business?

Financial Advisors Owe Investors a Fiduciary Duty

No matter what, financial advisors must act in the best interest of their clients, choosing investments that are not only suitable in themselves but suitable for the investor specifically. For more on suitability issues, please visit our page dedicated to the subject.

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If you or someone you know has suffered financial injury as a result financial exploitation, broker misconduct, or investment fraud, please contact our team of experienced securities attorneys immediately for a free consultation at 1-855-462-3330 (toll-free) or by using our online contact form.